1.1. BACKGROUND OF THE STUDY
1.2. STATEMENT OF THE PROBLEM
There are numerous problems that hinder the growth of small and medium scale enterprises in developing countries. Lack of access to credit hinders the growth and development of SMEs. Also is the problem of cutthroat competition of the established industries and the small and medium scale enterprises also are a critical problem. Most times commercial banks do not follow the credit guidelines and other related policy issues affecting the small-scale enterprises in Nigeria. In some instances where commercial banks obey policy guidelines, they charge very high interest rate. The problem of credit to small scale industries may not necessarily be as a result of financing insufficiency but rather for some other reasons among which are.
- Insufficient preparation on the part of small scale entrepreneurs in their request for credit assistance.
- Information gaps as to range of funding institutions and scope of services available in these institutions
- Moreover, servicing of small business accounts is relatively experience, risky and difficult to monitor with low turnover of account.
However, the parishioners in the sector small scale industry do not display competence in preparing justification for their project. Most of them do come up with cash flow projections, projected balance sheets, among others. They are based on personal rudimentary in formation and speculation. At times when they seek the advice of consultants, the outcome that are made figures project based on assumptions which are most of the time unrealistic. As a result such proposals are out rightly rejected by banks when credit demands in this sector are not in compliance in this government monetary policy and credit guidelines which must be adhered to by banks.
1.3 RESEARCH QUESTION
- What are the roles of commercial banks in financing small scale Enterprises in Nigeria?
- What are the impact of commercial Banks on small and Medium Scale enterprises in Nigeria?
- What are the effects of financing on the performance of SMEs?
- What are the problems encountered by SMEs in obtaining finance from commercial banks?
- What is the relationship between the performance of SMEs and economic development?
- What are the possible ways in which commercial banks can help in the success and advancement of small and medium scale enterprises?
1.4 AIMS OF THE STUDY
The major purpose of this study is to examine sport diplomacy and regional integration. Other general objectives of the study are:
- To examine the role of commercial banks in financing small scale Enterprises in Nigeria.
- To examine the impact of commercial Banks on small and Medium Scale enterprises in Nigeria.
- To examine the effect of financing on the performance of SMEs.
- To examine the problems encountered by SMEs in obtaining finance from commercial banks.
- To examine the relationship between the performance of SMEs and economic development.
- To suggest possible ways in which commercial banks can help for the success and advancement of small and medium scale enterprises.
1.5 RESEARCH HYPOTHESIS
H0: There is no significant role of commercial banks in financing SMEs in Nigeria.
H1: There is a significant role of commercial banks in financing SMEs in Nigeria.
1.6 SIGNIFICANCE OF THE STUDY
This study will highlight problems associated with the role of commercial banks in financing small scale industry in Nigeria. It will give information on the possible areas for improvement. Furthermore, the study will help commercial banks to assess their role in financing small scale industry in Nigeria. Moreover, suggestions and recommendations made in this paper will help policy makers formulate new economic policies to maintain or modify the existing one. It will equally serve as a guideline to researchers who may wish to research this study in the future. It will also help small scale entrepreneurs to make sufficient preparation in their request for credit assistance. It will guide the entrepreneurs in making credits demands that are in compliance with government monetary policy. The last but not the least it will help the entrepreneurs to display competency in preparing justification for their project. It is rear to see most of them coming up with cash projections, projected balance sheets.
1.7 SCOPE OF THE STUDY
1.8 LIMITATION OF STUDY
Financial constraint– Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint– The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.
1.8 DEFINITION OF TERMS
Small Scale Enterprise: An enterprise with a labor size of 11-1000 workers or a total cost of not more than 50 million including working capital but excluding cost of land (Sule, 1986:207).
Medium Scale Enterprise: An industry with a labor size of between 10-300 workers or a total cost of over 50 million but not more than 200 million including working capital but excluding cost of land (Clifford, 1972:85).
Commercial Bank: A financial institution that acquires deposit from savings, surplus unit and give out loans to savings deficit units.
Sole Proprietorship: Is a business owned and conducted by one person presumably assisted by one or more persons for intakes wife and children.
Enterprises: It means any establishment engaged in production, repairs or services to satisfy human wants and make room for profits.
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